NICSA 2011: "It's All About Income Now"

MIAMI -- After the flat decade that stock-based mutual funds have had and with post-World War II baby boomers starting to retire, "it's all about income now,'' said Matt Witkos, president of Eaton Vance Distributors, at the opening of the National Investment Company Service Association 29th Annual Conference & Expo.

The challenge is to mix in a portfolio of global bonds along with stock funds to give some kind of protection against downward movements in stocks, Witkos said in the "Face the Membership" panel that is opening the show.

"You have to give them some kind of flow to live on,'' Witkos told an audience of roughly 300 attendees in the Grand Ballroom at the Doral Golf Resort & Spa.

Witkos' observation was echoed by other asset managers on the panel. "We see a huge move into fixed income, a huge move into beta," said George M. Pereira, chief financial officer of Charles Schwab Investment Management.

Schwab's customer base is moving from an "equity b ase" to a "fixed income base,'' as they search for some form of guaranteed return from their capital.

Indeed, Prudential Investments has had little success in getting customers to buy stock funds, said senior vice president Stuart Parker, "unless you give them some protection on the downside."

Investors in stocks and stock funds have had to live through the dot.com bust a decade ago, the real estate bubble two years ago and the Flash Crash last year.

The question, now, he said, is how to get to an 8 percent or 10 percent annual return on assets held, with that "some protection on the downside,'' while doing it.

This is a huge swing from the '90s, when "it used to be could be you could get fired if you were at 20% up and market was up 22%,'' Parker said.

The answer in these "decumulation years" for boomers is to create some kind of product that may, in effect, be an annuity -- but with potential on the topside, said Robert Turner, chief executive officer of Turner Investments.

The move into fixed income may be misplaced. "Our industry is great about fighting yesterday's battle,'' Turner said.

The stock market has doubled in value since the credit crisis ravished prices in fall 2008. Now, he said, a "long-only global portfolio" is likely to be the best-performing option.

But, he noted, "investors have "also been burned by what's transpired in the last decade" and are looking for some kind of protection on the value of assets and the ability to bank on some kind of income from it.

After last year's Flash Crash on May 6, investors pulled $80 billion out of long-term stock mutual funds in the United States. In January, investors put more than $20 billion back in, according to Investment Company Institute statistics.